This week, Project Syndicate catches up with Katharina Pistor, Professor of Comparative Law at Columbia Law School and Director of the Law School’s Center on Global Legal Transformation.
Project Syndicate: The United States Business Roundtable, which comprises the CEOs of some of America’s largest corporations, recently called for an end to putting shareholders first, in favor of a governance model that accounts for workers, communities, and other stakeholders. If US CEOs are serious about abandoning the shareholder-primacy model, you recently wrote, they should support fairly comprehensive legal reforms. What changes are most urgent, and how likely do you think the US is to implement them?
Katharina Pistor: It is not for the CEOs of corporations to declare whom they wish to serve, because they are agents, not principals. The fact that they have openly done so underscores the weaknesses of the existing corporate governance framework. If shareholders – who are widely regarded as principals – cannot keep their agents in check, who can?
Like shareholder governance, stakeholder governance requires accountability. Giving some stakeholders minority seats on the board will not be enough. Consider the challenge for employee-stakeholders: as long as they can be fired at will, how can they ensure that their interests are protected? And without organizations, such as unions, they will not be able to overcome their collective action problems.
We ask all our Say More contributors to tell our readers about a few books that have impressed them recently. Here are Pistor's picks:
by Frank Pasquale
This book covers similar ground as Shoshana Zuboff’s more recent book The Age of Surveillance Capitalism, but is much more granular and pays more attention to the legal underpinnings of the digital algorithms that control money and information.
by Bernard Lietaer and Jacqui Dunne
An inspiring read about how to design more inclusive and resilient money and payment systems. Instead of simply digitizing the existing system (central bank digital currencies) or privatizing it (through Libra), we could draw lessons from cooperative payment systems and use technology to scale them.
by Tobias Straumann
This book serves as a stark reminder of the political dimension of debt. I love history, and as a German national, I was taught early on the importance of studying it, not because it will necessarily repeat itself, but rather because it holds lessons that are critical to understand the present.
From the PS Archive
Pistor explored the governance implications of the water crisis in Flint, Michigan. Read the commentary.
Pistor exposed the flaws in European Union creditor countries’ vision of Europe’s future. Read the commentary.
Around the web
At an event in Washington, DC during the Libra hearings, Pistor explores the legality and significance of private money in a world that seems reticent to adopt it. Watch the video.
Pistor explains how the state has long used law to back private money – with dire consequences. Read the article.
Answering questions about her book, The Code of Capital, Pistor provides insight into what transforms mere wealth into an asset that automatically creates more wealth. Watch the interview.